Katy Perry’s Litigation Foe Loses Bid to Retain Mansion

The Ninth U.S. Circuit Court of Appeals has affirmed the denial by the Bankruptcy Court for the Central District of California of a financing proposal put forth by restaurateur/entrepreneur Dana Hollister, who was forced to seek Chapter 11 protection after losing a publicized court battle with singer Katy Perry over which of them would purchase a chateau owned by the Roman Catholic Archdiocese of Los Angeles.

While combat with Perry and the archdiocese in the Los Angeles Superior Court is over—ending in judgments against her totaling $5 million in compensatory damages and $10 million in punitive damages (reduced to $6.5 million under a settlement)—Hollister is now engaged in a fray with Bobs LLC. It holds a second lien on her 22,000-square-foot storied 1923 Silverlake mansion, “Paramour,” which she wants to keep and Bobs wants sold.

To enable her to retain possession of the 4.3-acre estate, her major asset (in the face of the court appointment of an agent to effect a sale), Hollister sought consent of the Bankruptcy Court to obtain a $7 million “priming loan”—a loan to a debtor-in-possession to enable continued business operations. Prior to the pandemic, she rented out the 15-bedroom manor, on a five-acre lot, for events such as weddings, as well as filming, and she has a tentative plan to turn it into a hotel.

Bobs—which was owed $11.8 million as of July 9—objected. The lender would then be in first position, bumping U.S. Bank (owed $4.6 million) to second position, and Bobs would then hold a third lien.

Its equity cushion (which exists where the value of the collateral exceeds by a reasonable margin what is owed the creditor) would be inadequate, it maintains, and asserts that its new position would not meet the legal requirement of being “indubitably equivalent” to its prior position. Depicted above is a mansion in Silverlake which restaurant-owner/real estate investor Dana Hollister, who has declared bankruptcy under Chapter 11, wants to retain through a loan, thus placing the lender in top position among creditors. The Ninth U.S. Circuit Court of Appeals on Tuesday affirmed an order denying the request, agreeing with the Bankruptcy Court that this would be to the detriment of the holder of the second lien. Bankruptcy Judge’s Order.

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